2009 will provide rich pickings for investors who keep their nerve

The past few days have seen some impressive year-end gains for shares, but these are small-fry when compared with the losses for the year as a whole. The FTSE 100 Index started 2008 at 6456.9, that is a loss of almost 33 per cent on the year and one of the biggest annual falls on record. Compare that with the Dow which has lost 36 per cent, Tokyo 42 per cent and Hong Kong almost half its value.

The speed of the UK's economic slump took all the experts by surprise. Nowhere has that been better reflected than the stock market where private investors have seen the value of their savings plunge. Even if they had left their money on deposit in the bank, they will have seen a decline in the real rate of return since the start of the year as interest rates nose-dived.

Judging by the economists, businessmen and representatives I interview on BBC Radio 5 Live's Wake Up To Money, we are in for the gloomiest start to any New Year in living memory. Many people are already comparing it to the dark days of depression which followed the Wall Street crash in 1929.

That doom-laden scenario may be a bit over the top but there is no denying the number of workers losing their jobs is growing. The total will top two million in a few days and will accelerate in 2009.

The economists are warning this recession will be a long, drawn-out affair, made worse by the banks' reluctance to lend money.

So what are stock market investors to do in 2009? Those taking a long-term view, say five years or more, will enjoy rich pickings, providing they stick to quality. The share prices of many blue chip companies have never been cheaper. These same companies are well placed to take advantage of the economic revival when it comes. Mining shares have more than halved in value this year while retailer Marks & Spencer struggles to hold above the 200p level. That is almost half what Sir Philip Green was ready to pay for the shares a few years back. Supermarket chains such as Sainsbury, Tesco and Morrison have enjoyed a good festive season. Sainsbury yields almost four per cent and Tesco 3.5 per cent.

The oil price has fallen a long way since July, when it reached a record $147 a barrel. It now trades at $40. But the price is expected to rise in 2009 and, with it, the fortunes of the oil companies. BP yields almost six per cent and Royal Dutch Shell almost five per cent.

If you want straight forward value-for-money, look no further than the utilities, which were remarkable in 2008 for the level of price rises they managed to push through. United Utilities yields almost seven per cent and Scottish & Southern Energy five per cent.

House prices continue to fall and the lack of cash for mortgages will exacerbate the situation next year.

Some of the bigger American houses are forecasting a year-end Footsie 100 of between 5800 and 6000, while others believe it has further to fall - as low as 2500.

The first few months of 2009 will be difficult with more profit warnings, dividend cuts and companies going to the wall. But for investors who keep their nerve, 2009 will offer plenty of buying opportunities later in the year.